Understanding Angel Investors

As entrepreneurship is picking trend in India so is the trend of investing in Startups. If you are in an early stage in your business then after you have utilize your saving and built a product which is already selling.., you may expect some Angel Investors to be really interested in your startup, and other exception is you have and excellent idea and a really good team then investors may be willing to help you build the product too. Before we go ahead with knowing and understanding Angel Investor i suggest you go through 10 different financing/Funding options that you have .

If you want to know what god thinks of money just look at the people who He gave it to -Dorothy Parker

Who is Angel Investor

Angel investors are the High Net-worth individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. These are the individuals don’t work for firms and unlike Venture Capitalist they invest their own money into Startups.

Sophisticated Angel investors have experience and expertise in the industry they usually invest in, they not only bring money to a startup but a whole lot of knowledge support which helps in building you business. Angel care about liquidity as much as venture capitalist and even more as they are investing their own money, and they will work hard with you to saving every penny they have invested in your startup. Professional angel investors seek investments that have the potential to return at least 10 or more times their original investment within 5 years, through a defined exit strategy, such as plans for an initial public offering or an acquisition.

What Motivates Angel Investors to invest

Most entrepreneurs need angel investors or VCs to succeed. Similarly, angel investors and VCs need entrepreneurs to succeed. Angel investors, VCs and entrepreneurs are all part of the same entrepreneurial ecosystem.

There are many reasons or motivations that an Angel investors have when they look to invest in any startups and the major reason for which they do this is listed below

• They have made it and they want to give back to the society by helping the new generation of entrepreneurs.
• They want to stay updated with the current technology and the happening buzz in the entrepreneurial ecosystem.
• They want to make money
• They want to relive the life of entrepreneurship. They enjoy helping Startups for intellectual satisfaction.
•  They are motivated to invest with their other investor buddies and have connection with the smarter crowd who are changing the world.
• Entrepreneurs remind them of their own Son or daughter which they never had and thats why they are willing to invest in unproven idea/person and take higher risk to take entrepreneur to the next stage.

There may be many other reason but these are the most major motivation factors for any Angel Investors, and Most often  Angel investors are more interested in Entrepreneurs than in the idea.

How to get Angel Funding

Depending on the size of investment/funding that you are looking for you may contact an individual investor or a network of individual who pool their funds to invest in bigger sizes of deals. One such famous network of investors is Indian Angel Network, there are many other which you will find when you Google “Angel Investors India” .

Application Process – Many angel investors expect entrepreneurs to fill out a formal application form, while others may just seek an executive summary of the business proposal. In some cases you will have to send 4-5 slides ppt explaining you business. The entrepreneur can contact any potential angel investors in order to find out all of the necessary documentation requirements for their application.

The Network will then screen all the applications and select the Startups which and fix a in-person meeting with the entrepreneur and take the Deal forward. They will be invited to personally present their pitch and business proposals to the angel investors. After they present their pitch and all presentation materials to their audience, a question and answer session will usually follow. These investment meetings are held on a monthly basis.

Once the idea is presented the Investors will carry on Due- Diligence which goes on for several months. Investors who are interested in an entrepreneur’s business plan, along with industry specialists, will conduct a comprehensive assessment of the proposed business strategy. They are also expected to perform a background check of the entrepreneur and pursue any references in order to validate their credibility as an honest business owner. During the due diligence period, additional cuts will be made.

Apart from all this you have to appoint a proffessional lawyer to explain to you all the futre legal commitments and complications and you also need to do due-deligence before going ahead and commiting with the Angel investors by knowing all the pro’s and cons of the Deal that you make. Wish you all the best!

Suggested Read for you:

1. Angels and Demons of Angel-investors/
2. 10 Business Financing- Finding the right funding options
3. Innovative Crowd Funding and Micro-finance
4. Venture-capital-india